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Downturn Opens Gates for Ameristar

After 23 years of annual double digit increases in sales, Ameristar Fence Products expects its first decline in revenues this year.And that has the management team fired up about opportunity.“This will be the first year that we will actually go backwards, probably about 15 percent this year,” said Mark Meek, president, sales and marketing. “Most of it is due to the economic situation out there. With all the growth we have had, it is tough to adjust to a down year. None of us had to ever work that kind of a situation before.”In response, the company is opening its own regional distribution centers in nine locations across the U.S. and is gearing up for surges in demand for high-security and stimulus package projects. “Because we are such a strong company, our attitude in these tough economic times is: We are going to get more aggressive, we are making bigger investments, we are hiring more outside people,” Meek said. “A lot of our competitors will probably not survive the year. Our attitude is let’s go out there and take as much market share as we possibly can.”Ameristar, with nearly 1 million SF under roof at its campus at 1555 N. Mingo Road, builds steel and aluminum fencing products for residential, commercial, industrial and high-security applications.Employing 505 and with $165 million in sales last year, the firm stakes claim to being the largest manufacturer of ornamental fencing in the world.Meek said he expects sales to drop to about $140 million this year and that it is the company’s product mix that has maintained its strength.“In some of the markets, like the high-security market, everybody will be fine because there is a lot of good business there,” he said. “But for a lot of our competitors, 90 percent of their business is residential. Only 25 percent of our business is residential. If we were 90 percent residential, we would be laying people off – we would be having some serious issues.”John Hunter, chief operations officer, said Ameristar is using the downturn to its advantage.“During the last nine months, we will have opened the nine RDCs and we have virtually rebuilt the plant from front door to back door,” he said. “Most companies would lay people off. We have used the down time for the labor force to refurbish the equipment.”“Everybody else is kind of laying back and weathering the storm,” said Dennis C. Patrick, vice president of manufacturing. “We are leading the pack.”The most significant changes and posturing in the marketplace occur during challenging economic time, said Vice President Barry K. Willingham.“Because of our financial strength and capabilities and culture, we are going to leverage that legacy to our advantage and we are going to come out of this much stronger than we were before,” he said.Fencing in ProfitsWhile most companies are cutting back on inventory, Ameristar is increasing production, in part to stock its new RDCs“(Founder) Eddy Gibb’s business philosophy has always been three main points: Service, service, service,” said Hunter. “With that we have always run relatively inventory intensive. I have no expectation of changing that.”“If anything, we will continue to increase inventory to put us in a better position given the economic conditions, and because the customers we are serving are pulling their inventories down,” Patrick said. “We can become more valuable by having more available.”Meek said even though the fencing industry has grown fourfold in the past ten years and is continuing to grow, distributors are cutting back on inventory. That demand led to Ameristar adopting its own strategy to move the product closer to the contractor.“For us to continue to grow, we have had to take a different path. In a period of 18 months we will have opened nine regional distribution centers to try to get the product closer to the markets that they serve and also to compensate for the fact that our distributors, who did a good job in the past, are kind of weak sisters right now,” he said.The RDCs range in size, product mix and inventory according to the history of sales in a region. St. Louis and Charlotte, N.C., have smaller footprint models of 8-10,000 SF with no yard space, while locations in Delaware, California, Chicago and Orlando are 30-32,000 SF with two acres of yard space. “Today’s business climate dictates that you have to have product readily available to be sold today and picked up tomorrow,” he said. “They (contractors) can sell the product on Monday, install on Tuesday and get paid on Friday.”Tons of FenceIn its nearly quarter century of operation, Ameristar has grown from a manufacturer of gate hardware for wooden fences to 14 product families, manufactured in an increasingly integrated and high-tech facility.Today, the company takes delivery of 46,000 pound coils of steel at its Ameristar Coil Processing facility on a rail spur on Tulsa Airport Authority property north of the main plant and transforms the raw product into the pieces needed for manufacturing fence panels.Robotic fusion welding stations produce panels at a pace of more than 130 an hour per station. A normal day will see shipments of 14-17 trailer loads carrying 48,000 pounds of fencing each.In addition to investing in capital upgrades and technology, the company reports very little employee turnover and an enviable worker safety record. As of April 22, Ameristar completed 1 million employee hours without a lost time injury, and has been recognized by the Oklahoma Safety Council as the “Most Improved Health and Safety Program” for 2008. “I like to say we are Tulsa’s best kept secret because so little of our business goes into the greater Tulsa area or Oklahoma,” said Hunter. “The majority of our products are shipped, on average, 700-800 miles. We ship product to both coasts and Canada and we have quite a few overseas accounts. We ship product to probably every major metropolitan area in the U.S.”Demand Hinges on SecurityWhile the economic downturn has pinched the firm’s performance this year, Ameristar sees other factors coming into play that are expected to significantly boost the firm’s bottom line.The firm is particularly well positioned to take advantage of growing demand for security fencing as well as stimulus package requirements.While the security fencing field is not currently a top line dollar producer for the company, “it is pushing past $20 million, and it has put us in a space that has opened up doors” for the firm, said Willingham, who is Ameristar’s security product expert.The outlook is wide open.“Our high security business over the next five years will be the fastest growing part of our business,” Meek said. “It is going to grow multi-fold – no doubt about it.”With proprietary products like its patented Impasse fence and Stalwart anti-ram system, which can stop a 15,000-pound vehicle traveling 40 mph within 1 meter, Ameristar’s security products are found in some of the highest security demand locations.It protects the U.S. Senate Building, the presidential air package at Andrews Air Force base, the Pentagon, Keesler Air Force Base, Maxwell Air Force base as well as other military facilities and critical infrastructure in the Middle East, Willingham said.“We are working heavily with oil and gas in relationship to all the new chemical facility anti-terrorism standards, we actually wrote a white paper for Nuclear Regulatory Commission based on our technologies,” he said. “We are deeply imbedded in the higher end of things, and that footprint is spreading as people realize that what has been done in the past is ineffective.”As the CFATs initiative ramps up Ameristar expects to see a surge in the security business.“They are doing budgetary work and we are getting swamped with that stuff,” Meek said. “Some of it will come later this year, but the bulk of it will be the next couple of years.”As a company that was built on a “buy American” philosophy, Ameristar is also seeing a surge in mill certification requests as stimulus package projects develop. The stimulus package mandates that projects use domestic steel“If you look back two years, we were asked maybe once a quarter for a certification from the steel mill that its made here. Three or four months ago, we were being asked every month, and now we are being asked every week,” Meek said.He projected that in “three months we will be getting asked every day to validate because these people have to document where they bought the steel from.”“Fortunately for us, unlike most of our competitors, because Eddy is so pro American, all the steel that you see here is American,” he said.“It gives us a big advantage on any project that has any amount of stimulus money attached to it.”